Do Democrats classify small companies by the ease with which their earnings can be turned into tax revenue by applying the Obama fair share principle? Explaining what happens when small businesses hire their 50th employee, this is how the Obamacare resource, HealthCare.gov, separates small companies from large companies:
You are generally considered a large business if you have more than 50 employees.¹
The Small Business Administration defines a small company a bit differently:
The Offce [sic] of Advocacy defines a small business as an independent business having fewer than 500 employees.²
The Republican Party was comfortable with the 500 employee benchmark in its Small Business Tax Cut Act of 2012, the 20% tax cut for small companies that met its demise in Harry Reid’s Senate. So what do the Republican Party and the SBA have in common? While some may question the SBA’s success at shepherding its small business flock through the recession, the agency is not interested in small companies for their fair share potential to generate tax revenue. Neither is the GOP. The White House sees things differently, and when that 50th employee comes on board, small companies are eligible for the Obamacare fair share tax (see: Obama Employer Mandate, Fairness, and Shared Responsibility Suck).
How does Obamacare tax credit penalize job creation?
Not only does Obamacare penalize job creators once they hit the 50 worker mark, it changes its definition of a small company by denying eligibility for the Small Employer Health Insurance Tax Credit to firms with 25 or more employees. Ironically, SBA Administrator Karen Mills claims the credit will spur hiring:
The Small Business Health Care Tax Credit has benefited hundreds of thousands of small businesses since the Affordable Care Act passed in 2010. After listening to business owners around the country, the President is proposing to make the tax credit available to more businesses and easier to claim.³
Nothing sells like a tax credit small companies don’t use.
Citing the Congressional Budget Office, the White House claims the Obamacare tax credit will save small companies $40 billion by the end of the decade.4 In the here and now up to 4 million businesses were estimated to be eligible in 2010, but only 170,300 companies applied and many asked for only partial tax credit.5 Why so few and so little? Small companies who qualify usually don’t provide health insurance:
One factor limiting the credit’s use is that most very small employers, 83 percent by one estimate, do not offer health insurance. According to employer representatives, tax preparers, and insurance brokers that GAO met with, the credit was not large enough to incentivize employers to begin offering insurance.6
Even if these small companies wanted to provide health insurance, many of their employees would rather have cash, something tax credit guidelines took into account by stipulating that average employee pay for eligible small companies cannot exceed $50,000 per worker:
Low-wage employees working for small employers generally prefer to receive wages over insurance benefits as part of total compensation.7
There is nothing better than taking credit for something you don’t have to pay for. If Republicans get the urge to cancel tax credits and loopholes to appease Harry Reid and the White House they should pick a few like this one. Better yet, they could do small companies a real favor and live up to their pledge to get rid of Obamacare altogether.